FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
DISCIPLINARY COMMISSION
James N. Scahill, pro se Donald R. Lundberg, Executive
Secretary
Seth T. Pruden, Staff Attorney
115 West Washington Street, Suite 1165
Indianapolis, IN 46204
IN THE
SUPREME COURT OF INDIANA
______________________________________________________________
IN THE MATTER OF )
) Case No. 49S00-0103-DI-172
JAMES N. SCAHILL )
__________________________________________________________________
DISCIPLINARY ACTION
__________________________________________________________________
May 20, 2002
Per Curiam
James N. Scahill’s client cashed an $80,500 IRA while the client’s
divorce was pending and claimed he lost the proceeds in a restaurant.
Scahill, who practices in Indianapolis, did not inform the dissolution
court or the adverse party of the loss of the IRA even after the trial
court awarded a portion of the non-existent IRA to the client’s wife. We
conclude that the respondent engaged in professional misconduct and
reprimand him for his actions.
This attorney disciplinary case is now before us for final
determination upon the hearing officer’s findings of fact and conclusions
of law. The hearing officer determined that the Commission failed to
demonstrate that the respondent violated Ind. Professional Conduct Rules
3.3(a)(2) and (4), as charged by the Commission in its verified complaint
for disciplinary action. Those rules provide in relevant part:
a) A lawyer shall not knowingly:
. . .
(2) fail to disclose a material fact to a tribunal when
disclosure is necessary to avoid assisting a criminal
or fraudulent act against a tribunal by the client;
. . .
(4) offer evidence that the lawyer knows to be false.
If a lawyer has offered material evidence and comes
to know of its falsity, the lawyer shall take reasonable
remedial measures.
Pursuant to Ind. Admission and Discipline Rule 23(15), the Commission has
petitioned this Court for review of the hearing officer’s report, arguing
that a finding of misconduct is proper in this case. Our jurisdiction in
this case arises from the respondent’s admission to the bar of this state
in 1984.
We find that the respondent represented a client in a dissolution
action. The client’s Financial Declaration filed with the court on
September 5, 1995, showed the client owned an individual retirement account
(IRA) containing $72,500. By March 30, 1996, the IRA had grown to $80,500.
On that date, the client withdrew the IRA in cash without the knowledge of
his wife or the respondent. A few days later, the client told the
respondent that he had cashed in the IRA but lost the proceeds at an
Indianapolis restaurant.
The trial court conducted the final hearing in the dissolution matter
on May 21, 1996, at which the division of the marital estate was contested.
Both the respondent and opposing counsel presented evidence that the
marital estate included the IRA, which both parties valued at $72,500.
Neither the respondent nor his client informed the court or the opposing
side that the IRA no longer existed.
Unaware of the loss of the IRA, the trial court entered a decree on
June 21, 1996, awarding to the client’s ex-wife a percentage of the sale of
the marital residence and $40,920 of the IRA. The respondent filed a
Motion to Correct Errors on July 19, 1996, in which he argued that the
trial court had failed to consider his client’s pre-marriage contribution
to the IRA. The motion did not reveal the client’s dissipation of the IRA.
The trial court issued an amended decree on October 29, 1996. That
decree reduced the ex-wife’s share of the IRA to $20,866.80 and ordered
payment to her from the account within 60 days. The respondent still did
not inform the court that the IRA no longer existed.
The client failed to pay his ex-wife the $20,866.80 as ordered and
sought to discharge his obligations by filing a bankruptcy petition. The
dissolution court later conducted a hearing at which the client said he had
emptied the IRA, traveled to a fast food restaurant with the $80,500 from
the account, fell asleep in the men’s restroom, and awoke without the
money.
In finding no misconduct, the hearing officer noted that the Financial
Declaration, pursuant to the instructions on that form, listed the IRA at
its value as of the date the petition for dissolution of marriage was
filed. Therefore, the hearing officer concluded that the Financial
Declaration did not contain false evidence. The hearing officer further
determined that the respondent had no duty to disclose the client’s
dissipation of the IRA to the court or to the other side; therefore, no
criminal or fraudulent concealment occurred. The Commission argues that
the failure to disclose the dissipation amounted to a fraud on the court.
The elements of constructive fraud are: (i) a duty owing by the party
accused of the misconduct to the complaining party due to their
relationship; (ii) violation of that duty by the making of deceptive
material misrepresentations of past or existing facts or by remaining
silent when a duty to speak exists; (iii) reliance thereon by the
complaining party; (iv) injury to the complaining party as a proximate
result thereof; and (v) the gaining of an advantage by the party accused of
the misconduct at the expense of the complaining party. Rice v. Strunk,
670 N.E.2d 1280 (Ind. 1996).
The respondent contends he owed no duty to reveal the IRA and, thus,
constructive fraud has not been proved. He relies on Selke v. Selke, 600
N.E.2d 100 (Ind. 1992), in which we addressed the client’s duty to disclose
the value of an asset where the other party knew of its existence but did
not inquire as to its value before entry into a final settlement agreement:
While a duty to disclose asset value information may
arise from unique factual circumstances including
the express terms of a property settlement agreement,
or from a request for discovery under the Indiana Trial
Rules, such a duty of spontaneous disclosure is not
imposed as a matter of law by Ind. Code 31-1-1.5-11(b) –
11(c) of the Indiana Dissolution of Marriage Act.
Clearly there is no express statutory duty of mandatory
disclosure. Nor can such a duty reasonably be inferred
from the Act.
600 N.E.2d at 101-102.
Contrary to the client’s claims, Selke supports a finding of a duty to
disclose here, inasmuch as it recognizes that such a duty may arise from
the circumstances or discovery rules. Here, a duty to disclose arose from
both.
By local rule, the Financial Declaration required by the trial court
constituted “mandatory discovery” which required supplementation under Ind.
Trial Rule 26(E)(2) and (3). Marion County Family Law Rule 6(E) (1996),
now Rule 4(E). Trial Rule 26(E)(2)(b) requires a party to supplement a
response when information that was correct when made is no longer true and
the “circumstances are such that a failure to amend the response is in
substance a knowing concealment.”
The client’s failure to amend the Financial Declaration amounted to a
knowing concealment under the circumstances. The Financial Declaration
listed the IRA as an asset with a value of $72,500 at the time the petition
for dissolution was filed. The net marital estate was valued at $154,434,
and the IRA was the most valuable asset within it. When the client cashed
in the IRA and “lost” the proceeds, the IRA ceased to exist and no longer
was a tangible asset which could be divided by the dissolution court. The
trial court could not fulfill its duty of dividing all marital property in
a just and reasonable manner as required then by Ind.Code
31-1-11.5-11 (now Ind.Code 31-15-7-4) if it was unaware of the loss of a
marital asset comprising nearly half of the net marital estate. The client
knew or should have known that the loss of the most valuable marital asset
would impact the manner in which the trial court accomplished the division
of the marital estate. Thus, we find that T.R. 26(E)(2)(b) imposed on the
client a duty to update the Financial Declaration to reflect his client’s
dissipation of the IRA.
The respondent violated his professional duty by remaining silent
regarding his client’s actions and by introducing evidence that the
respondent knew misrepresented the current facts. The trial court’s
original and amended decrees, as well as the evidence submitted by the
respondent’s wife at the final hearing, reflect that the trial court and
the client’s wife relied on the representation that the IRA was an existing
marital asset. Both the court and the wife were damaged by this reliance;
the trial court was misled into entering an award which could not be
enforced, and the client’s ex-wife did not receive her share of the IRA as
ordered. The respondent’s actions benefited his client, who escaped at
least temporarily the obvious financial consequences of his conduct. Given
our finding of constructive fraud by the client, we conclude that the
respondent violated Prof.Cond.R. 3.3(a)(2) by failing to disclose a
material fact to a tribunal when disclosure was necessary to avoid
assisting a fraudulent act against a tribunal by the client.
We also find that the respondent, through his failure to update the
Financial Declaration and his submission of evidence at the final hearing
indicating the existence of the IRA, presented false evidence in violation
of Prof.Cond.R. 3.3(a)(4). The Financial Declaration listed the IRA as a
marital asset, and the respondent submitted evidence at the final hearing
that the IRA was a marital asset. Even after the trial court awarded the
wife a substantial sum from the IRA account, the respondent did not
disclose that the IRA no longer existed. Instead, he advocated in his
motion to correct errors a change in the decree reducing, but not
eliminating, the wife’s share of the IRA. The respondent’s continued
submission of an incorrect Financial Declaration and his presentation of
evidence at the final hearing and in his motion to correct errors as to the
IRA’s existence constituted presentation of false evidence in violation of
Prof.Cond.R. 3.3(a)(4).
We recognize the tension between the duty to keep a client confidence
under Prof.Cond.R. 1.6 and the obligations under Prof.Cond.R. 3.3(a)(2) and
3.3(a)(4). There are circumstances where resignation is the appropriate
step. See, e.g., Comment to Prof.Cond.R. 1.6 (withdrawal mandatory under
rule where lawyer’s services will be used by the client in materially
furthering course of criminal or fraudulent conduct). However, proceeding
to facilitate a client’s misleading of the court is not an acceptable
option.
Having found misconduct, we must now assess an appropriate discipline
for it. In making this assessment, we note the respondent believed he
would be violating his duties to his client if he disclosed the client’s
dissipation of the IRA. However, the respondent’s actions complicated the
dissolution matter, prompted the entry of two decrees incapable of
execution, and ensured the client’s ex-wife would not receive her fair
share of the marital estate immediately, if at all. Given these competing
considerations, and the respondent’s lack of any prior disciplinary action,
we find that an admonishment adequately addresses the respondent’s
misconduct. See, e.g., Matter of Thonert, 733 N.E.2d 932 (Ind. 2000)
(public reprimand for failure to disclose to appellate tribunal and client
controlling adverse authority known to him); Matter of Anonymous, case
number 49S00-9003-DI-197 (Ind. 1992) (private reprimand for failing to
disclose death of client in claim for damages from the Indiana Patient’s
Compensation Fund).
Accordingly, the respondent, James N. Scahill, is hereby reprimanded
and admonished for his misconduct.
The Clerk of this Court is directed to provide notice of this order in
accordance with Admis.Disc.R. 23(3)(d) and to provide the clerk of the
United States Court of Appeals for the Seventh Circuit, the clerk of each
of the United States District Courts in this state and the clerks of the
United States Bankruptcy Courts in this state with the last known address
of respondent as reflected in the records of the Clerk.
Cost of this proceeding are assessed against the respondent.
Dickson, Sullivan, Boehm, and Rucker, JJ., concur.
Shepard, C.J., concurs in the finding of misconduct, but believes the
misconduct warrants a short period of suspension.